Driven by an uptick in key verticals such as BFSI, telecom, manufacturing, retail, and distribution, the revenue growth of domestic IT services companies is expected to be around 9-12 percent (in dollar terms) in FY2022, a report said on Tuesday.
Despite the growth, concerns have emanated from elevated attrition levels for the industry due to strong demand for digital technologies and lack of adequate skilled manpower to service the same.
According to investment information and credit rating agency ICRA, the growth will be driven by robust demand for digital technologies from enterprises globally, and partly on a low base of last year due to Covid-19 impact.
Industry growth is expected to moderate marginally to 6-9 per cent in FY2023, partly also on account of the base effect.
Carrying forward the momentum from recent quarters, ICRA’s sample of 13 IT companies recorded revenue growth of 17.6 percent in Indian rupee terms and 17.3 per cent in dollar terms in Q2 FY2022.
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“In line with the growth trajectory witnessed over recent quarters, Indian IT services companies are expected to report healthy growth over the near term due to aforementioned favourable factors,” said Deepak Jotwani, Assistant Vice President & Sector Head, ICRA.
“Companies are reskilling employees to overcome this challenge. Moreover they have also been able to achieve higher employee productivity through increased deployment of technology. Hiring by IT companies is at an all-time high buoyed by strong demand and net addition over the past four quarters has been increasing exponentially,” Jotwani elaborated.
Moreover, IT services companies remain focused on enhancing the share of fixed price contracts as it assures better revenue visibility and also allows for higher deployment of offshore resources where the salaries are 60-70 percent lower, coupled with better utilization of manpower across such projects and deployment of automation.
The share of fixed price contracts has remained between 60-65 percent over the past three years.
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“There was some increase in H2 FY2021, which has tapered to 61 percent levels in Q2 FY2022 given the higher share of new contracts and mix of contracts secured,” the report said.
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